Economics Final
Terms
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- Economic system
- the method used by a society to produce and distribute goods and services
- Poverty threshold
- income level below which income is insufficient to support families or households.
- Surplus
- situation in which quantity supplied is greater than quantity demanded aka excess supply.
- Disequilibrium
- when quantity supplies is not equal to quantity demanded in the market.
- Cetaris Paribus
- "all other things held constant.
- Services
- actions or activities one person performs for another.
- Regulation
- govt intervention in a market that affects the production of a good.
- Free rider
- someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good
- Diminishing Marginal returns
- level of production in which marginal product of labor decreases as the number of workers increases.
- Inferior good
- a good that consumers demand less of when their incomes increase.
- Demand Curve
- a graphic representation of a demand schedule.
- Trade-off
- alternative we sacrifice when we make a decision.
- Dividend
- the portion of corporate profits paid out to stockholders.
- Demand schedule
- table that lists the quantity of a good a person will buy at each different price.
- Market demand schedule
- table that lists the quantity of a good all consumers in a market will buy at every different price.
- Centrally planned economy
- economic system in which the central govt makes all the decisions on the production and consumption of goods and services.
- Production possibilities curve
- curve that shows alternative ways to use an economy's resources.
- Substitution effect
- consumers react to an increase in a good's price by consuming less of that good and more of other goods.
- Growth
- Sales and profits explode. New retailers enter the market and begin to copy the retailers idea. Late in this stage both market share and profitability approach their highest levels.
- Inflation
- a general increase in prices.
- Shortage
- good or service is unavailable.
- Complements
- two goods that are bought and used together.
- Free contract
- concept that people may decide what agreements they want to enter into.
- Fixed cost
- a cost that doesn't change no matter how much of a good is produced.
- In-kind benefits
- goods and services provided for free or at greatly reduced prices.
- Labor
- the effort that people devote to a task for which they are paid.
- Public sector
- part of the economy that involves the transactions of the govt.
- Income effect
- change in consumption resulting from a change in real income.
- Goods
- physical objects such as clothes or shoes
- Externality
- an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
- Price floor
- minimum price for a good or service.
- Price war
- series of competitive price cuts that lowers the market price below the cost of production.
- Private sector
- part of the economy that involves the transactions of individuals and businesses.
- Marginal cost
- cost of producing one or more unit of a good.
- Collective
- large farm leased from the state to groups of peasant farmers
- Technology
- process used to produce a good or service.
- Operating cost
- cost of operating a facility such as a store or factory.
- Laissez faire
- the doctrine that government should not interfere in commercial affairs
- Cash transfers
- direct payments of money to eligible poor people.
- Excess demand
- when quantity demanded is more than quantity supplied.
- Marginal revenue
- additional income from selling one more unit of a good; sometimes equal to price.
- Socialism
- social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society.
- Food stamps
- government- issued coupons that recipients exchange for food stamps
- Public disclosure laws
- laws requiring companies to provide full info about their products.
- Excise tax
- a tax on the production or sale of a good.
- Production possibilities frontier
- line on a production possibilities graph that shows the maximum possible output for a specific economy.
- Oligopoly
- (economics) a market in which control over the supply of a commodity is in the hands of a small number of producers and each one can influence prices and affect competitors
- Factor market
- market in which firms purchase the factors of production from households.
- Perfect competition
- market structure where a large number of firms all produce the same product.
- Specialization
- concentration of the productive efforts of individuals and firms on a limited number of activities.
- Minimum wage
- minimum price that an employer can pay to a worker for an hour of labor.
- Authoritarian
- characteristic of an absolute ruler or absolute rule
- Factor payments
- the income people receive for supplying factors of production, such as land, labor, and capital
- Variable cost
- cost that rises or falls depending on how much is produced.
- Cartel
- a formal organization of producers that agree to coordinate prices and production.
- Cooperative
- a business organization owned and operated by a group of individuals for their mutual benefit.
- Gross Domestic Product
- the dollar amount of all final goods and services produced within a country's borders in a year; total value of all final goods and services produced in an economy.
- Supply schedule
- chart that lists how much of a good a supplier will offer at different prices.
- Opportunity cost
- the most desirable alternative given up as a result of your decision.
- Public interest
- concerns of the public as a whole.
- Total revenue
- total amount of money a firm receives by selling goods or services.
- Incentive
- an expectation that encourages people to behave in a certain way.
- Market failure
- situation in which the market doesn't distribute resources efficiently.
- Consumer sovereignty
- power of consumers to decide what gets produced.
- Patent
- license that gives the inventor of a new product the exclusive right to sell it for a certain period of time.
- Sole proprietorship
- business owned and managed by a single individual.
- Command economy
- economic system in which the central govt makes all the decisions on the production and consumption of goods and services.
- Marginal returns
- ?
- Profit motive
- force that encourages people and organizations to improve their material well being.
- Microeconomics
- the branch of economics that studies the economy of consumers or households or individual firms
- Interest group
- a private organization that tries to persuade public officials to act or vote according to group members' interests.
- Commodity
- something that is the same product no matter who produces it (paper, gas)
- Market economy
- economic system in which decisions on production and consumption are based on voluntary exchange in markets.
- Excess supply
- when quantity supplied is more than quantity demanded.
- Supply shock
- sudden shortage of food.
- Thinking at the margin
- deciding whether to do or use one additional unit of some resource.
- Communism
- political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government.
- Capital
- any human-mad resource that is used to create other goods or services.
- Merger
- the combination of two or more commercial companies
- Welfare
- govt aid to the poor.
- Human capital
- skills and knowledge gained by a worker through education and experience.
- Marginal product of labor
- change in output from hiring one additional unit of labor.
- Corporation
- a legal entity owned by individual stockholders.
- Tax
- required payment to a local, state, or national govt.
- Mixed economy
- economic system that combines the free market with the limited govt involvement.
- Heavy industry
- requires a large capital investment that produces items used in other industries.
- Entrepreneur
- ambitious leader who combines land, labor and capital to create and market new goods or services.
- Traditional economy
- economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services.
- Macroeconomics
- study of behavior and decision making of entire economics.
- Business Cycle
- recurring fluctuations in economic activity consisting of recession and recovery and growth and decline
- Price ceiling
- maximum price that can be legally charged for a good or service.
- Inelastic
- describes demand that is not very sensitive to a change in price.
- Search costs
- financial and opportunity costs consumers pay when searching for a good or service.
- Normal good
- a good for which the demand increases as income rises and decreases as income falls.
- Guns or butter
- phrase that refers to trade-off that nations face when choosing whether to produce more or less military or consumer goods.
- Land
- natural resources that are used to make goods and services.
- Standard of living
- level of economic prosperity.
- Self-interest
- one's own personal gain.
- Product market
- market in which households purchase the goods and services that firms produce.
- Invisible hand
- self-regulating nature of the marketplace.
- Elastic
- describes demand that is very sensitive to a change in price.
- Underutilization
- using fewer resources than an economy is capable of using.
- Public policy
- ?
- Work ethic
- commitment to the value of work and purposeful activity.
- Physical capital
- all human-made goods that are used to produce other goods and services; tools and buildings.
- Monopoly
- (economics) a market in which there are many buyers but only one seller
- Free enterprise
- an economic system characterized by private or corporate ownershipof captal goods; investments that are determined by private decision reather than by state control; and determined in a free market
- Law of demand
- consumers buy more when price decreases and less when price increases.
- Increasing marginal returns
- level of production in which marginal product of labor increases as the number of workers increases.
- Efficiency
- using resources to maximize production of goods and services.
- Elasticity of demand
- measure of how consumers react to a change in price.
- Market supply schedule
- a chart that lists how much of a good all suppliers will offer at different prices.
- Equilibrium
- point at which quantity is demanded and quantity supplies are equal.
- Total cost
- fixed costs plus variable costs.
- Bond
- a formal contract to repay borrowed money with interest at fixed intervals.
- Law of supply
- tendency of suppliers to offer more of a good at a higher price.
- Safety net
- govt programs that protect people experiencing unfavorable economic conditions.
- Subsidy
- govt payment that supports a business or market.
- Law of increasing costs
- ?
- Privatize
- to sell to individuals state-run firms which are then allowed to compete with one another in the marketplace.
- Open opportunity
- concept that everyone can compete in the marketplace.
- Rationing
- system of allocating scarce goods and services using criteria other than price.
- Factors of Production
- land, labor, and capital; the three groups of resources that are used to make goods and services
- Transition
- period of change in which an economy moves away from a centrally planned economy toward a market based economy.
- Scarcity
- limited quantities of resources to meet unlimited wants.
- Private property rights
- concept that people have the right and priviledge to control their own possessions as they wish.
- Black market
- a market in which good are sold illegally.
- Spillover costs
- costs of production that affect people who have no control over how much of a good is produced.